Indirect Costs

FAS and SEAS Policy on Assessments and Indirect Costs

The FAS and SEAS Policy on Assessments and Indirect Costs seeks to provide comprehensive guidance pertaining to the application of indirect costs on federal and non-federal sponsored research awards and assessments on gifts for reasons of sound management and responsible stewardship.

The Faculty of Arts and Sciences (FAS) and the John A. Paulson School of Engineering and Applied Sciences (SEAS) provide substantial academic facilities, including laboratories, libraries, information technologies, administrative support, and other resources that enable faculty to engage in innovative research and incomparable scholarly activities. The cost of providing the staffing and infrastructure necessary to support the programmatic activities of our faculty is borne largely by the FAS and SEAS; thus, FAS and SEAS must receive reimbursement for some portion of indirect (overhead) costs incurred when activities are funded by gifts and sponsored awards.

When an external entity does not pay for some or all overhead costs associated with the activity it is funding, the FAS and SEAS pay for these costs, with the result that funds must be diverted from other institutional priorities. Charging assessments on gifts and allocating indirect costs on grants enable FAS and SEAS to recoup a portion of the overhead costs associated with externally funded activities and the reimbursement of these costs provides FAS and SEAS with a source of revenue to reinvest in its infrastructure, which, in turn, supports the academic pursuits of our faculty. The following procedures should be followed for all sponsored awards and gifts unless the school/tub official approves an exception.

The below is a pilot effective November 1, 2025, which will be evaluated as needed, after an initial implementation period.

Gifts

Current-use gifts are defined as donations that may be spent down in their entirety. Like endowment gifts, current-use gifts can either be unrestricted or restricted. An unrestricted gift may be used for the general purposes of the tub in which it is established, while restricted gifts are limited by the donor for a particular, defined purpose. Current-use gifts to the FAS or SEAS must include a minimum 15% assessment. The assessment is applied to the aggregate of expenses incurred on the gift, excluding expenses for direct student support.

FAS Development works closely with donors in explaining the need for the assessment. Therefore, it is our practice to not accept gifts that prohibit assessments. In rare circumstances, if FAS or SEAS Finance will accept a gift with less than a 15% assessment, a PI/Department must recover the assessment shortfall using the methods outlined above for Non-Profit/Foundation Sponsors:

Direct charging faculty academic year salary and benefits or other costs attributable to the gift account
Offering discretionary sources to pay for the assessment shortfall
Requesting an assessment waiver from the Dean of the FAS or Dean of SEAS, who in turn, must receive a waiver from the University’s Gift Policy Committee.
Please discuss with the Finance Office before offering a recovery plan.

Exclusions:

The following costs are not charged the 15% Assessment on gifts accounts:

Direct student support: object codes 6140, 6401-6449, 6460, 6461, 6470-6473, 6490
Transfer of Admin fees: object code 8922

FAS Guidance on Other Sponsored Activities

Not all grants are for research. Some provide support for other sponsored activities: a conference or symposium, editing a series of papers, building a database, maintaining a collection of scientific specimens, etc. These projects are eligible for the 34% Other Sponsored Activities rate. Please note contracts and grants must each be assigned only one indirect cost rate, per our federally negotiated rate agreement. Proposal budgets may not utilize multiple rates under any circumstances. It is sometimes unclear whether this rate applies to projects with complex scopes of work, so please consult with FORA before moving forward on a budget using this rate.

FAS Guidance on On-Campus vs. Off-Campus Indirect Cost Rates

Please review the OSP policy on On-Campus or Off-Campus Indirect Cost Rates. In accordance with the policy, a project is considered on-campus or off-campus based on where the preponderance of time and effort will be expended, NOT where the majority of dollars will be spent. If 50% or more of Harvard-budgeted effort is off-campus, the entire project may be considered off-campus and the off-campus rate may be used. The same rate must be used over the entire project lifespan, as our federally negotiated indirect cost rate states that “each contract or grant is assigned only one indirect cost rate.” (i.e. one year cannot be off-campus and another year on-campus.)

If there is no Harvard-budgeted effort, then the considerations below may be taken into account. Each point will be considered over the entire lifespan of the project to determine whether the preponderance of work performed is on or off campus.

Harvard faculty time in the field
Location for which Harvard’s direct costs, excluding capital equipment and subawards, will be spent
Field work expenses, such as rent and per diems
Non-PI personnel time in the field

Please note that the final determination on On-Campus versus Off-Campus is to be made by the FORA Pre-Award Team. In order to prevent last-minute budget changes, please consult with FORA before moving forward on a budget containing either the Off-Campus rate.

Who Must Comply

All faculty and administrators within Harvard University FAS & SEAS tubs, divisions, and departments who receive or manage funding from gifts and grants.

Roles and Responsibilities

The following roles and responsibilities are listed below according to their primary functional role as it relates to the policy:

Awareness

Gift Assessments: FAS Office of Finance / SEAS Office of Accounting is responsible for ensuring that all parties are aware of the policy and processes for gift assessments. In the case of waiver requests for gifts, these offices will facilitate any request with the appropriate Deans, school development offices, and Alumni and Donor Services (ADS).
Grant/Awards: FAS Office for Research Administration (FORA)/SEAS Research Administration is responsible for ensuring that all parties are aware of the policy and processes for grant/awards. In the case of sponsor waiver requests, Research Administration can work with FAS Departments or SEAS areas on options as identified in this policy.

Communication

Donors: FAS Development is responsible for communicating with donors and educating them on the FAS or SEAS assessment policy.
Faculty and Administrators: FAS Departments/SEAS Areas are responsible for communicating this policy to faculty and administrators who solicit or receive gifts, grants, and awards under this policy and for ensuring gift or grant proposals include the relevant school assessment or indirect cost.

Compliance

Assessments: Alumni and Donor Services (ADS) is responsible for ensuring that gifts are not accepted on behalf of the University with terms that prohibit assessments. In addition, ADS will bring such gifts to the attention of the FAS Office of Finance or SEAS Office for resolution.
Overhead assessments: The Office for Sponsored Programs (OSP) assists with ensuring that grants/awards are not accepted on behalf of the FAS or SEAS with terms that prohibit overhead assessments. OSP will bring such awards to the attention of FAS Office of Research Administration or SEAS Research Admin for resolution.